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One of the arguments for legalizing of marijuana is that it is suppose to save a significant amount of money spent in enforcing laws against the crime. Some of the cited supposed savings are:

  • Not spending 'War on Drugs' money on enforcing marijuana laws
  • Savings of not having to pay the incarceration costs of all the individuals currently in jail for marijuana related offenses (the supposed big savings).
  • Money earned from taxing marijuana sales
  • Less tangible indirect savings, such as decreasing crimes caused by illegal marijuana sale lowering burden on police, or increased econmic strength that comes from not creating a criminal record for people smoking marijuana allowing them to work better jobs then those with records can get and thus strength economy etc.

There would be some expenses to legalizing marijuana as well, such as cost to the FDA to monitor marijuana sales and enforce any appropriate safety procedures, and possible some other law enforcement costs caused by people acting under the influence of marijuana, but generally marijuana proponents claim a net savings of expenses.

Has any report or study been done that attempted to properly identify these theoretical savings, and costs, of legalization and put a dollar amount on total savings that legalization of marijuana may provide (or increased costs, if marijuana legalization increases total spending instead of saving money)?

  • To make the question more answerable, it might be best to focus on savings for the Federal government only. – divibisan Nov 7 '19 at 18:47
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    @divibisan: But much of the spending is at state level, as is all the real-world data on savings from states that have legalized it. – jamesqf Nov 8 '19 at 17:05
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    I would also be curious to know the indirect costs of marijuana prohibition, such as the community losses from gangs fighting over turf, the need to use more expensive alternatives to marijuana for medical conditions which marijuana can alleviate, and so on. That would certainly be much harder to calculate a realistic dollar figure. – EvilSnack Feb 29 at 13:12
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According to CATO (page 5), the "State-Level Expenditures" of marijuana prohibition in the US was $5,386,753,000 annually, as of 2008, a figure encompassing judicial, incarceration, treatment, and other costs.

On the federal level specifically, according to the U.S. Sentencing Commission's 2018 numbers, there were 2,118 federal inmates incarcerated for marijuana offenses. According to the Federal Register, each inmate costs an average of $36,299.25 (in 2017, the latest figure available). That math implies a $76,881,811 annual cost to taxpayers for federal marijuana inmate incarceration.

To estimate potential tax revenue, I added the amounts collected in WA, CA, and CO, as reported by Forbes:

Washington made the most in taxes last year with an estimated $319 million. California was close behind with $300 million while Colorado recorded the third-highest estimated tax revenue with $266 million.

Which sums to $885,000,000. Dividing that by the population of all three states, 52,788,200, we arrive at an average of $16.76 per resident of revenue. Multiplying that by the US population of 327,200,000, we get $5,485,544,117 of potential revenue.

  $5,386,753,000 of current expendatures
+ $5,485,544,117 of potential revenue
+ $76,881,811  of federal inmate costs
----------
$10,949,178,928 of annual savings

I will not try to estimate your part about "Less tangible indirect savings", because that's probably less objective, but If anyone has some figures for that, please share.

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    Are you sure your premise that legalization would reduce legal expenses is even sound? ‘Getting Worse, Not Better’: Illegal Pot Market Booming in California Despite Legalization: "... It’s been a little more than a year since California legalized marijuana — the largest such experiment in the United States — but law enforcement officials say the unlicensed, illegal market is still thriving and in some areas has even expanded." – Just Me Nov 7 '19 at 20:56
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    @JustMe: I suspect you're right in that it's not a 100% savings, at least not right away, but i'm just trying to address OP's question. That article also claims "no other state has an illegal market on the scale of California", so it might not be a typical result. It's also quite early to be calling a final outcome. Lastly, the large black market is undoubtedly due to it's illegality elsewhere and thus exports; a problem that wouldn't appear if the law were federalized. – dandavis Nov 7 '19 at 21:33
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    @JustMe, California is an unusual situation. It's not only because of the unreasonably high legal prices that make the black market more attractive, in 75% of its cities it's not even possible to make legal purchases, as they have banned legal outlets. I.e. cannabis is legally allowed to be bought and consumed, but it's not legally possible to be purchased. – Ray Butterworth Nov 8 '19 at 1:33
  • @Just Me: It still would be a savings, or could be if law enforcement simply ignored the "illegal" market. Even if they didn't, there'd be some savings since no one could be arrested for simple possession. You also have a fundamental problem with "law enforcement officials say", since they have a vested interest in making & keeping it illegal. – jamesqf Nov 8 '19 at 3:21
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    @Caleth Ending drug prohibition would make using the police power to engage in civil asset forfeiture mostly unjustifiable. Police departments make a lot of money from civil asset forfeiture. – Joe Nov 8 '19 at 21:37
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This is a difficult question because calculating a net benefit involves subtracting from the taxes on marijuana losses on other things. I don't know of a federal estimate, but some state-level data exists:

In 2018, Colorado legal pot sales topped $1.2 billion, with the state pulling in about $270 million in taxes. Compare that to the approximately $45 million that the state collected in tax on alcohol that same year.

A study from Georgia State University found that alcohol sales fell by 15% in states where only medical marijuana had been legalized and by 20% in counties where recreational marijuana is sold legally. However, the states made more than enough back from marijuana sales, since marijuana taxes are typically greater than alcohol taxes. [...]

However, there are a lot of questions about how much tax revenue states will actually earn, especially considering that some states have missed their projections by a long shot.

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While projections for other types of goods are typically more reliable, this is an entirely new market and therefore prone to error. Why? Well, the jury is still out. Some researchers and pundits have guessed that in California taxes are too high, that the black market is too strong or that the red tape of bureaucracy is just too much.

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  • Well, California has demonstrated the capacity for screwing up a good idea. – EvilSnack Feb 29 at 13:10
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Let's first sort out the small potatoes from the big ones.

The estimate given in DanDavis's answer puts the projected savings at less than 0.1% of the GDP ($11B / $19T < 0.001).

Yet what is the demonstrated effect on the GDP of a comparably addictive substance that has gained widespread adoption? According to the CDC, marijuana addicts 1 in 10 users and 1 in 6 youth users. 30% develop a substance use disorder for it. By comparison, alcohol is estimated to addict somewhere between 9 and 15% of drinkers, depending on how addiction is measured. So in terms of order of magnitude of those who become addicted, we have a familiar analog.

Just how impactful is this addiction? Consider the following chart from the Washington Post: https://www.washingtonpost.com/news/wonk/wp/2014/09/25/think-you-drink-a-lot-this-chart-will-tell-you/

According to the chart, the top 10% of alcohol-consuming American adults drink on average nearly 74 alcoholic beverage-equivalents per week. There is no way that these people--10% of the American adult population--are not perpetually inebriated.

Not even taking into account loss of life or limb through accidents, addiction treatment, and illness, perhaps 10% of the American GDP is lost to alcoholism by never being created in the first place -- one hundred times the projected "savings" due to decriminalizing and legalizing marijuana use.

With comparable addiction rates, we can reasonably expect that if a similar number of people begin using marijuana, the (practically "unseen") losses to our GDP could also be of the same order of magnitude. Even assuming that a recent nationwide average of 12% of Americans having used marijuana stays the same under nationwide legalization, the projected losses due to incapacitation and addiction are still easily a whole order of magnitude above the projected "savings".

A building contractor I met in Colorado says he now requires five workers to do the work of three since the state became a haven for recreational marijuana use. Tardiness and absenteeism in marijuana users has been noted to be markedly increased over non-users. This anecdote is consistent with an observed 75% increase in absenteeism to those who use marijuana at all (not just those 10% who are addicted; these are people who were able to get a job in the first place!). Even laying aside increases in workplace accidents and injuries due to impairment, as well as the more difficult-to-measure effects of decreased productivity and the opportunity cost of non-participation, this figure is by itself a notable remark on the true cost to legalize marijuana.

In all, $1.9 Trillion is a rather large and sobering sum I would think.

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    I'm sorry, but the part of me trained by skeptics sees many instances of failed equivalency. I feel that quoting that marijuana is addictive to 1/10 people without citing the severity of the addiction (ie close to that of caffeine) is highly misleading, but ignoring that the larger logical fallacy is presuming marijuana and alcohol affects are similar without providing any proof that they should be. Just because two values are addictive does not mean the affect on society are the same. Caffeine is physically addictive, that doesn't make it's affect on society equivalent to alcohol. – dsollen Mar 2 at 20:54
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    For me to consider this a valid argument I would need one of two things. ideally studies that actually site the harm of marijuana, instead of alcohol. Failing that studies that gave a fair comparison of the risk of marijuana to alcohol first, and also properly backed up your currently completely unexplained claim that 10% of Americas GDP is lost to alcohol (which I admit I'm skeptical on. alcohol does have significant cost, but 10% of our GDP is freaking HUGE amount of money...). As of using uncited numbers combined with unproven equivalence makes me rank this as a low value answer. – dsollen Mar 2 at 20:59
  • It is neither patently misleading nor a fallacy to present an argument justifiable by its scale, and very loose constraints on equivalence, to the extent that there is no evidence to contradict it. That would be an opinion-based argument. Near doubling of accident and injury rates and absenteeism support an argument of comparable harm. Even an impairment or loss-of-productivity effect that is less than 10% as strong as that of alcohol is still more than sufficient to overwhelm the purported savings. Strong margins to defeat. Is the impairment level of marijuana truly far below 5% or so? – pygosceles Mar 2 at 21:04
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    @pygosceles: Strengthened to the point where it becomes nonsense and/or job security for the "addiction" treatment business. How do you separate "can't stop" from "don't want to stop"? – jamesqf Mar 4 at 18:25
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    Issues: 1. link to treatment center sales pitch as a citation. 2. no explanation of new losses after legalization if rate stays the same. 3. no citation for "perhaps 10% of the American GDP is lost". 4. assuming one can't be a stoner and a drunk, which would knock down that 1.9t new loss "figure". 5. no evidence that heavy drinkers would be part of workforce anyway, many are retired, felons, and students. If this weren't a competing answer i'd down-vote it for being opinionated... – dandavis Mar 30 at 7:13

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